1.1 CIPFA is pleased to submit this memorandum
of comments to the Environment Sub-Committee's Inquiry into Local
Authority Governance.

1.2 As a professional accountancy body that
specialises in the public services, CIPFA has a particular interest
in the underlying governance arrangements of local authorities
and will shortly be publishing best practice guidance in conjunction
with SOLACE to assist them in establishing their own codes of
corporate governance[21].
We believe that it is important to promote a local, self-regularity
approach to good governance, with a strong emphasis on continuous
improvement, rather than impose a universal "one-size-fits-all"
approach.

1.3 The comments that follow focus on the
principles that CIPFA believes should underpin any organisational
structure if sound governance arrangements are to be assured.
In relation to the Sub-Committee's specific terms of reference
our evidence concentrates on the impact of changes in political
management structures on accountability and on the roles of local
authority officers.

1.4 In summary CIPFA's views are that:

 it is too early to assess the impact
of changes in political management structures on efficiency, transparency
or accountability;

 the emphasis at this stage and in
the future should be on ensuring that each authority's approach
to political management is underpinned by a sound framework of
corporate governance;

 the respective roles and responsibilities
of members and officers must be clearly defined and understood;

 officers must continue to work for
the authority as a whole, providing impartial advice to executive,
scrutiny and overview functions.

2.1 In CIPFA's view it is far too early
to pass judgement on the new political management arrangements.
In theory the new approaches will lead to improvements, particularly
in terms of speed of decision making and accountability for decisions
taken. It is too early, however, to confirm that these benefits
are being realised in practice.

2.2 In the short term authorities are having
to work hard to develop and implement a framework of supporting
rules and procedures to underpin the new arrangements. These are
the essential checks and balances which protect the system from
abuse. It will inevitably take time before these procedures are
put in place and successfully embedded in every authority in the
country.

2.3 The new structures create fundamentally
new roles for elected members and it will take time before the
nature of these roles becomes evident in practice. The emergence
of these roles will inevitably impact upon the roles and responsibilities
of senior officers within authorities and again we expect these
changes to take time to evolve fully. In CIPFA's view, the challenge
is to modernise, but in doing so to maintain the best features
of existing well managed councils. It is vital, for example, that
the strong sense of partnership which exists between elected members
and senior officers is not damaged or diluted by the implementation
of new structures. Similarly it is critically important to preserve
the political neutrality of officers and their duty to advise
the whole council.

2.4 In CIPFA's opinion, the focus at this
stage should be on ensuring that each authority's approach to
political management is built on solid foundations. The key ingredient
here is a robust but dynamic approach to corporate governance
that is sufficiently flexible to respond to cultural and organisational
change without sacrificing probity and accountability.

2.5 Opting to introduce a particular approach
to political management will achieve nothing unless the underlying
systems and processes that an authority has in place to manage
its internal affairs and its relationships with key stakeholders
are themselves sound and "fit for purpose". If insufficient
attention is paid to the need for sound governance arrangements
there is a risk that new structures of political management will
be regarded as a bureaucratic "add on" and as a result
fail to take root throughout the organisation or have an impact
on the wider community.

2.6 CIPFA's own work in this area indicates
that effective local government relies on the credibility of,
and public confidence in, elected councillors and officials and
that good corporate governance provides an essential underpinning
for this credibility and confidence. The principles of good corporate
governance, embedded in the culture of individual local authorities
and applied within a defined framework of management processes,
should be transparent to all stakeholders. By making explicit
their high standards of self governance, local authorities can
give a lead to potential partners, from the public, private or
voluntary sectors and to their citizens. In this way, CIPFA sees
sound corporate governance as the keystone for effective community
governance.

2.7 To a significant extent, local government
already conforms with, in whole or in part and in many different
ways, the principles of good governance and has therefore a sound
base on which to build regardless of the structure of political
management adopted. In particular, there is a strong regulatory
framework of control and there are robust arrangements for monitoring
and review.

2.8 In CIPFA's opinion it is an authority's
underlying approach to corporate governance that is the key to
whether or not any new approach to political management is effective
and whether greater transparency and accountability is achieved
as a result.

2.9 In practical terms the framework being
developed by CIPFA with SOLACE, the LGA and the Audit Commission
emphasises that authorities must be able to demonstrate that they
are complying with the underlying principles of good governance,
that is:

 openness and inclusivity;

 integrity;

 accountability.

2.10 If authorities are to do this, these
principles need to be translated into a framework which both seeks
to ensure that they are fully integrated in the conduct of the
authority's business and establishes a means of demonstrating
compliance. Therefore local authorities will need to demonstrate
that their systems and processes are:

 monitored for their effectiveness
in practice;

 subject to review on a regular and
continuing basis;

 continuously improved.

2.11 The fundamental principles of corporate
governance therefore need to be reflected in the different dimensions
of a local authority's business regardless of the political management
structure adopted. To give the Sub-committee an idea of what this
involves the five dimensions identified in the CIPFA/SOLACE Frameworkcommunity
focus; service delivery arrangements; structures and processes;
risk management and internal control; standards of conductare
set out in an annex[22]
to this submission. It is important to recognise that these "dimensions"
are not mutually exclusivefor example standards of conduct
are part of every dimension.

3. THEIMPACTOFTHENEWARRANGEMENTSONTHEROLESOF
LOCAL AUTHORITY
OFFICERS

3.1 Any change to the way in which local
authorities operate is bound to cause tensions and anxieties in
the short term and during the process of transition. However,
in CIPFA's view these inevitable difficulties will be significantly
mitigated if the respective roles and responsibilities of members
and officers are clearly defined and understood from the outset.
It is particularly important that the impartiality and professionalism
of officers is respected and a clear and sensible division of
responsibilities between officers and members maintained. At the
same time it is essential that members and officers continue to
work together as partners with shared aims and mutual respect.

3.2 At a more detailed level it is important
that in the interests of accountability, decision making under
any structure is supported by sound professional advice to avoid
the possibility that local authorities may:

 commit themselves to activities that
are outside their powers;

 incur damaging financial consequences;

 find their actions being challenged
by auditors, ombudsmen and the courts;

 find themselves open to criticism
from inspectorates.

3.3 To avoid such risks, new structures
of political management need to allow for careful pre-decision
making scrutiny so that professional advice is sought before a
decision is taken.

3.4 It is also important that whatever structure
is adopted, officers continue to work for the authority as a whole.
In particular both the executive, scrutiny and overview functions
should be able to gain access to the authority's senior officers
and to receive full, impartial advice. Councils should work hard
to encourage a culture in which such advice can be given freely
without fear or favour, and inspectors and auditors should be
encouraged to draw attention to any evidence which might suggest
the absence of such a culture.